Stock Options & 1099-Bs

[BP.]

Employee did two cashless exercises. Both flowed through payroll.

One 1099-B correctly reports the sales proceeds from one transaction.

The other 1099-B reports the sum of the two net checks the employee received. (To the penny, so not a coindcidence.) Seems incorrect to me.

The employer is out of business, and the agency who handled the transactions and issued the 1099-Bs has apparently made several mistakes on the whole deal, and doesn't really know how to report correctly. Though the employee is going to try and get the 1099-B corrected, it doesn't look promising.

If the employee is stuck with this 1099-B, do you have suggestions on how best to handle? Adjust basis so the end result is correct? Thx!

[Koss]

Stock Options

Those things get really complicated really fast.

The two 1099-B forms might be correct. Or they might contain some errors.

In many cases, part of the proceeds of the sale is taxable as capital gain, and part of it is taxable as wages. The part that is taxable as wages should be included on Form W-2, in Box 1, and also reported with Code V.

You'll need to look at the entire transaction very carefully. Why did he receive two checks? Were there two totally separate transactions? Or was one transaction somehow expressed in two different checks?

BMK

[BP.]

Those things get really complicated really fast.

The two 1099-B forms might be correct. Or they might contain some errors.

In many cases, part of the proceeds of the sale is taxable as capital gain, and part of it is taxable as wages. The part that is taxable as wages should be included on Form W-2, in Box 1, and also reported with Code V.

You'll need to look at the entire transaction very carefully. Why did he receive two checks? Were there two totally separate transactions? Or was one transaction somehow expressed in two different checks?

BMK

Two separate transactions, both carefully reviewed with lots of taxpayer documentation. Both correctly included in payroll, and I have the paystubs for those transactions. Two checks- one for each transaction.

One 1099-B looks correct as it matches employee's spreadsheet records for reportable gross proceeds. The other can't possible be correct, as it simply sums the two net checks taxpayer received, which is silly. I think . . .

[Gary2]

Those things get really complicated really fast.

The two 1099-B forms might be correct. Or they might contain some errors.

In many cases, part of the proceeds of the sale is taxable as capital gain, and part of it is taxable as wages. The part that is taxable as wages should be included on Form W-2, in Box 1, and also reported with Code V.

Code V is only used for the exercise of non-statutory stock options. It isn't related to the sale (though there's often a sale in practice), and it shouldn't appear at all for statutory options. Conversely, if the options are exercised by paying cash, it's possible for it to appear with no sale.

[Gary2]

One 1099-B looks correct as it matches employee's spreadsheet records for reportable gross proceeds. The other can't possible be correct, as it simply sums the two net checks taxpayer received, which is silly. I think . . .

If I'm understanding this, there were two checks issued. One 1099-B shows gross proceeds equal to one of the checks plus withholding shown for that transaction. The other 1099-B shows gross proceeds as equal to the two checks received, which isn't at all close to the second check plus the expected withholding for that check. Is that correct? Does either one show a basis?

Assuming your math is correct, I think you're going to have to figure out the correct values, and report these on the 8949 with code B and O, along with a statement of adjustments. Be prepared to send the IRS the spreadsheets or other records of the actual transactions. Also check if any of the special rules for small business stock applies.

[BP.]

Code V is only used for the exercise of non-statutory stock options. Does either one show a basis?

Thanks, Burton & Gary2, for your replies. ISO, so no W-2 Code V. No basis on the 1099-Bs.